Weak US GDP drove the US dollar lower overnight, Euro trying to break up

May 1, 2014

What a pathetically anaemic growth rate fr the first quarter of the year in the US. Data released overnight showed that the annualised rate of growth was just 0.1% which, because of the way the data is constructed, suggests that actual growth in the quarter was just 0.025%. Which is really just a rounding error away from zero growth.

But that didn’t perturb stock traders who took the Dow to a new high.

Perhaps they were more focused on the Fed’s comment which accompanied the taper to a still robust $45 billion that “household spending appears to be rising more quickly” as indeed the growth in personal consumption in the quarter of 1.3% showed.  Perhaps instead the market focused on the strong ADP employment data which rose 220,000 providing a solid lead for non-farm payrolls this Friday. Equally strong was the rebound in the Chicago PMI which bounced from 56.7 to 63.

In the end the Dow closed up 46 points or 0.28% to 16,581, the Nasdaq rose 0.28% to 4,115 and the S&P 500 rose 6 points for a gain of 0.3% to 1,884.

This has left the Australian market poised to open higher again with the futures market showing the SPI 200 June futures up 17 points to 5486. We’ll see how it goes on the day though.

In Europe stocks were mixed after mixed data with German retail sales down 0.7% in March but unemployment fell 25,000 also. EU CPI was just 0.7% in April slightly lower than the 0.8% expected. The FTSE closed up 0.15% to 6,780, the DAX rose 0.2% to 9,603 while the CAC fell 0.24% to 4,487. In Milan and Madrid stocks fell 0.88% and 0.02% respectively.

On currency markets the Euro rallied hard and is back near 1.39 sitting at 1.3865 this morning, the pound is at 1.6870 and USDJPY is back at 102.20. The Aussie rallied up toward 93 cents but found the going tough again but sits this morning at 0.9285.

Euro is trying to break out – and why not with such an appalling US GDP outcome. The downside trendline looks to have held once again as you can see in yesterday’s bar and we now see a little wedge top is being tested.

1.3880, if it breaks, opens the way to more resistance in the 1.3900/50 but how far can Euro really go? Only a break of recent highs will get trader excited.

On commodity markets Nymex crude dipped under $100 Bbl sitting at $99.69, gold is at $1292 oz and copper fell further to $3.02. On the Ags corn fell 0.34% while wheat and soybeans rose 0.71% and 0.44% respectively.

Data today sees the AiG performance of manufacturing index released along with export and import price indices and then the Chinese NBS PMI later today. there are a raft of European nations out for May Day tonight. In the US the key data release is the ISM manufacturing PMI but we also get the Markit version (in the UK as well) along with jobless claims and consumption data.

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